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NORTH CAROLINA STATE BOARD
OF COSMETIC ART EXAMINERS
Financial Statements
June 30, 2013 and 2012
oOo
TABLE OF CONTENTS
Pages
Management's Discussion and Analysis 1-3
Independent Auditor's Report 4-5
Statements of Net Position 6
Statements of Revenues, Expenses and Changes in Net Position 7
Statements of Cash Flows 8
Notes to Financial Statements 9-12
NORTH CAROLINA STATE BOARD OF COSMETIC ART EXAMINERS
Management's Discussion and Analysis
June 30, 2013
This section of the North Carolina State Board of Cosmetic Art Examiners' (the Board) financial report represents our
discussion and analysis of the financial performance of the Board for the year ended June 30, 2013. This information
should be read in conjunction with the audited financial statements included in this report.
Overview of the Financial Statements
The audited financial statements of the Board consist of the following components:
Management's Discussion and Analysis
Financial Statements
Notes to Financial Statements
The financial statements include comparative statements of net position, statements of revenues, expenses and changes
in net position, and statements of cash flows.
Financial Highlights and Analysis
Net position is an indicator of the financial health of the Board. As of June 30, 2013, assets exceeded liabilities by
$283,631. At June 30, 2012, assets exceeded liabilities by $345,225.
Table 1
Condensed Statement of Net Position
June 30, June 30,
2013 2012
Current Assets $ 1,169,717 $ 1,489,972
Capital Assets 137,382 72,448
Total Assets $ 1,307,099 $ 1,562,420
Current Liabilities $ 432,319 $ 861,703
Long-Term Liabilities 591,149 355,492
Total Liabilities $ 1,023,468 $ 1,217,195
Invested in Capital Assets $ 137,382 $ 72,448
Unrestricted Net Position 146,249 272,777
Total Net Position $ 283,631 $ 345,225
2.
NORTH CAROLINA STATE BOARD OF COSMETIC ART EXAMINERS
Management's Discussion and Analysis
June 30, 2013
The following table summarizes the revenues and expenses for the Board for the fiscal years ending June 30, 2013 and
2012:
Table 2
Condensed Statement of Revenues, Expenses and Changes in Net Position
Year Ending Year Ending
June 30, June 30,
2013 2012
Operating Revenues $ 2,161,376 $ 2,030,258
Nonoperating Revenues 26,403 33,243
Total Revenues 2,187,779 2,063,501
Operating Expenses 2,249,373 2,265,738
Change in Net Position (61,594) (202,237)
Beginning Net Position 345,225 547,462
Ending Net Position $ 283,631 $ 345,225
Net position decreased by $61,594 for the year ended June 30, 2013. Operating revenues increased by $131,118 and
expenses decreased by $16,365 during the year. The primary factor in the increased revenue was an increase in
business fees and licenses. The major decrease in expenses was a decrease in contracted services expense. There were
no significant variances between the Board's budget and the actual amounts for the year ended June 30, 2013.
Net Capital Assets
Net capital assets increased by $64,934 during the year ended June 30, 2013. The majority of the increase was due to
the purchase of a new online system that consolidates the Board's legacy software and databases into a modern web-based
application. The following is a summary of capital assets, net of depreciation:
Table 3
Capital Assets (net of depreciation)
June 30, June 30,
2013 2012
Electronic and Data Processing Equipment $ 136,908 $ 71,369
Office Furniture and Equipment 474 1,079
$ 137,382 $ 72,448
3.
NORTH CAROLINA STATE BOARD OF COSMETIC ART EXAMINERS
Management's Discussion and Analysis
June 30, 2013
Factors Impacting Future Periods
The majority of the Board's revenue results from the renewal and collection of license fees from cosmetologists. The
Board has converted from the three year cosmetologist renewal to a rolling renewal in which approximately 1/3 of
cosmetologists renew each year. It is expected that the conversion will result in more consistent revenue collection and
increased operating efficiencies. The Board served 86,484 licensees at June 30, 2013 and 71,856 at June 30, 2012. The
Board continues to encourage the renewal of payments by credit card using its website. The Board estimates that 72%
of eligible renewals were completed online. The Board also collects license fees from manicurists, estheticians,
cosmetologist apprentices, and schools.
Requests for Information
This report is intended to provide a summary of the financial position of North Carolina State Board of Cosmetic Art
Examiners. Questions or requests for additional information should be addressed to:
Lynda Elliott, Executive Director
North Carolina State Board of Cosmetic Art Examiners
1207 Front Street, Suite 110
Raleigh, NC 27609
To the Board of Directors
North Carolina State Board of Cosmetic Art Examiners
Raleigh, North Carolina
INDEPENDENT AUDITOR’S REPORT
We have audited the accompanying financial statements of North Carolina State Board of Cosmetic Art
Examiners, an agency of the State of North Carolina, as of and for the years ended June 30, 2013 and 2012, and the
related notes to the financial statements, which collectively comprise the Board's financial statements as listed in the
table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes the design,
implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our
audit in accordance with auditing standards generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks
of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments,
the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinions.
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of North Carolina State Board of Cosmetic Art Examiners, an agency of the State of North Carolina, as of
June 30, 2013 and 2012, and the changes in financial position and cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States of America.
5.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s
discussion and analysis on pages 1 through 3 be presented to supplement the financial statements. Such information,
although not a part of the financial statements, is required by the Governmental Accounting Standards Board, who
considers it to be an essential part of financial reporting for placing the financial statements in an appropriate
operational, economic, or historical context. We have applied certain limited procedures to the required supplementary
information in accordance with auditing standards generally accepted in the United States of America, which consisted
of inquiries of management about the methods of preparing the information and comparing the information for
consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we
obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on
the information because the limited procedures do not provide us with sufficient evidence to express an opinion or
provide any assurance.
Raleigh, North Carolina
October 28, 2013
6.
CURRENT ASSETS:
Cash $ 1,141,988 $ 1,461,494
Accounts Receivable 4,919 4,919
Prepaid Expenses 22,810 23,559
Total Current Assets 1,169,717 1,489,972
CAPITAL ASSETS:
Furniture and Equipment 39,144 39,144
Computer Equipment 328,744 241,436
Total 367,888 280,580
Less Accumulated Depreciation 230,506 208,132
Net Capital Assets 137,382 72,448
Total Assets $ 1,307,099 $ 1,562,420
CURRENT LIABILITIES:
Accounts Payable $ 57,697 $ 69,217
Accrued Salary and Vacation 73,869 65,641
Unearned Revenue 300,753 726,845
Total Current Liabilities 432,319 861,703
LONG-TERM LIABILITIES:
Unearned Revenue 591,149 355,492
Total Liabilities $ 1,023,468 $ 1,217,195
NET POSITION:
Invested in Capital Assets $ 137,382 $ 72,448
Unrestricted, Restated 146,249 272,777
Total Net Position $ 283,631 $ 345,225
The accompanying notes are an integral part of the financial statements.
2012
NORTH CAROLINA STATE BOARD OF COSMETIC ART EXAMINERS
Statements of Net Assets
June 30, 2013 and 2012
2013
7.
OPERATING REVENUES:
Business Fees, Licenses and Exams $ 1,026,462 $ 897,789
Certification Fees and Licenses 187,325 170,777
Fines, Penalties and Assessments 445,828 417,966
Continuing Education 62,455
Processing Fee 498,187 477,571
Miscellaneous 3,574 3,700
Total Operating Revenues 2,161,376 2,030,258
OPERATING EXPENSES:
Salaries 1,118,984 1,102,874
Health Insurance Contributions 209,631 192,931
Civil Penalty and Forfeiture Fund Payment 189,142 195,615
Transportation 130,756 99,155
Office Rent 113,243 113,106
Retirement Contributions 93,504 108,431
Social Security Contributions 83,379 86,608
Telephone and Communications 46,877 49,585
Legal and Other Professional Services 42,191 45,842
Postage 41,548 45,139
Electronic Payment Processing Fee 25,051 16,640
Printing 24,758 21,041
Depreciation 22,373 25,909
Miscellaneous 22,105 11,171
Unemployment Compensation 20,414 8,272
Supplies and Materials 17,106 8,876
Computer and Data Processing Expense 13,018 19,270
Contracted Services 12,390 88,256
Workmen's Compensation Insurance 12,040 7,972
Life and Disability Insurance 6,186 6,357
Compensation--Board Members 3,300 4,555
Meals and Lodging 826 3,262
Maintenance Agreements and Repairs 551
Workmen's Compensation--Medical Payments 4,871
Total Operating Expenses 2,249,373 2,265,738
OPERATING LOSS (87,997) (235,480)
NONOPERATING REVENUES:
Rental Income 19,328 19,043
Interest Income 7,075 14,200
Total Nonoperating Revenues 26,403 33,243
CHANGE IN NET POSITION (61,594) (202,237)
NET POSITION--Beginning of Year 345,225 547,462
NET POSITION--End of Year, Restated $ 283,631 $ 345,225
The accompanying notes are an integral part of the financial statements.
2013 2012
NORTH CAROLINA STATE BOARD OF COSMETIC ART EXAMINERS
Statements of Revenues, Expenses and Changes in Net Position
For the Years Ended June 30, 2013 and 2012
8.
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash Received from Licensees and Applicants $ 1,970,942 $ 1,823,683
Cash Payments to Employees for Services (1,110,756) (1,128,824)
Cash Paid for Operating Expenses (1,118,787) (1,144,145)
Net Cash Used by Operating Activities (258,601) (449,286)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Capital Assets (87,308) (46,284)
Receipt of Interest Income 19,328 14,200
Receipt of Rental Income 7,075 19,043
Net Cash Used by Investing Activities (60,905) (13,041)
NET DECREASE IN CASH (319,506) (462,327)
CASH--Beginning of Year 1,461,494 1,923,821
CASH--End of Year $ 1,141,988 $ 1,461,494
RECONCILIATION OF OPERATING INCOME TO
NET CASH USED BY OPERATING ACTIVITIES:
Operating Loss $ (87,997) $ (235,480)
Adjustments to Reconcile Operating Income to
Net Cash Used by Operating Activities:
Depreciation 22,373 25,909
Changes in Assets and Liabilities:
Prepaid Expense 749 (7,852)
Accounts Payable (11,520) 662
Accrued Salary and Vacation 8,228 (25,950)
Unearned Revenue (190,434) (206,575)
Net Cash Used by Operating Activities $ (258,601) $ (449,286)
The accompanying notes are an integral part of the financial statements.
2013 2012
NORTH CAROLINA STATE BOARD OF COSMETIC ART EXAMINERS
Statements of Cash Flows
For the Years Ended June 30, 2013 and 2012
9.
NORTH CAROLINA STATE BOARD OF COSMETIC ART EXAMINERS
Notes to Financial Statements
June 30, 2013 and 2012
1. Summary of Significant Accounting Policies
A. Organization:
The North Carolina State Board of Cosmetic Art Examiners (the Board) is established by Chapter 88
of the General Statutes of North Carolina to maintain minimum standards for services provided for regulating
the practice of cosmetology. The Board's operations are primarily funded through license and inspection fees.
B. Reporting Entity:
The Board is considered an agency of the state of North Carolina and along with other state licensing
boards is reported as an enterprise fund within the State's Comprehensive Annual Financial Report (CAFR).
C. Basis of Presentation:
The accompanying financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America. The Governmental Accounting Standards Board (GASB)
is the accepted standard setting body for establishing governmental accounting principles and reporting
standards. The Board applied all applicable Financial Accounting Standards Board (FASB) pronouncements
issued before November 30, 1989.
All activities of the Board are accounted for within a single proprietary (enterprise) fund. Proprietary
funds are used to account for operations that are financed and operated in a manner similar to private business
enterprises where the intent of the governing body is that the cost of providing goods or services to the
general public on a continuing basis be financed or recovered primarily through user charges or fees.
D. Basis of Accounting:
In accordance with Statement of Governmental Accounting Standards No. 34, the Board herewith
presents Statements of Net position, Statements of Revenues, Expenses, and Changes in Net position, and
Statements of Cash Flows. These statements reflect entity-wide operations of the Board. The Board has no
fiduciary funds or component units.
E. Accounting Estimates:
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates.
F. Accounts Receivable:
Accounts receivable consists of amounts due from employees. No reserve for doubtful accounts is
necessary.
G. Capital Assets:
Capital assets are recorded at original cost using a capitalization threshold of $500. Depreciation on
furniture and office equipment is computed using the straight-line method over the estimated useful lives of
the individual assets, ranging from three to seven years. Expenditures for repairs and maintenance are charged
to expense as incurred. The cost and related accumulated depreciation associated with capital assets are
removed from the accounts upon retirement or other disposition, and any resulting gain or loss is reflected as
nonoperating items.
10.
NORTH CAROLINA STATE BOARD OF COSMETIC ART EXAMINERS
Notes to Financial Statements
June 30, 2013 and 2012
1. Summary of Significant Accounting Policies (Continued)
H. Compensated Absences:
The vacation policy of the Board provides for accumulation of earned vacation with such leave being
fully vested when earned. Because such leave is payable to employees at termination, a liability for the
outstanding balances has been recorded. Accrued vacation totaled $73,869 and $64,845 at June 30, 2013 and
2012, respectively.
I. Net Position:
Net position is classified as invested in capital assets, net of related debt; restricted; and unrestricted.
Restricted net position represents constraints on resources that are either externally imposed by creditors,
grantors, contributors or laws or regulations of other governments or imposed by law through state statute.
The Board currently has no restricted net position.
J. Unearned Revenue:
License fees are assessed, collected and renewed for varying fiscal years for periods of one to three
years. License renewal fees, which cover periods subsequent to June 30, 2013 and 2012, are deferred and
recognized as revenue over the period to which they relate. The majority of dues collected result from the
renewal of cosmetologist licenses. Dues collected from the three year renewal of cosmetologist licenses are
used to fund the administration of licensing and regulating the state's cosmetologists.
K. Subsequent Events:
Subsequent events have been evaluated through October 28, 2013, which is the date the financial
statements were available to be issued.
2. Deposits
The Board's portion of the State Treasurer's Cash and Investment Pool was $1,141,988 at June 30,
2013 and $1,461,494 at June 30, 2012. It is the State Treasurer's policy and practice for deposits not covered
by federal depository insurance to be covered by collateral held by the State of North Carolina's agent in the
name of the State.
3. Capital Assets
Changes in capital assets for the year ended June 30, 2013 were as follows:
June 30, June 30,
2012 Additions Retirements 2013
Furniture $ 39,144 $ $ $ 39,144
Electronic and Data Processing 241,436 87,308 328,744
Total Assets $ 280,580 $ 87,308 $ $ 367,888
Changes in capital assets for the year ended June 30, 2012 were as follows:
June 30, June 30,
2011 Additions Retirements 2012
Furniture $ 40,370 $ $ 1,226 $ 39,144
Electronic and Data Processing 210,915 46,284 15,763 241,436
Total Assets $ 251,285 $ 46,284 $ 16,989 $ 280,580
11.
NORTH CAROLINA STATE BOARD OF COSMETIC ART EXAMINERS
Notes to Financial Statements
June 30, 2013 and 2012
4. Retirement Plans
Individual Simplified Employee Pension (SEP) Plan
Employees hired subsequent to June 30, 1983 are not eligible to participate in the Teachers' and State
Employee's Retirement System of North Carolina. Through June 30, 2012, the Board elected to provide those
employees with retirement benefits through individual simplified employee pension (SEP) accounts. Under a
SEP, the employer is permitted to make contributions directly to an individual retirement account set up by an
employee with a qualified financial institution. Under the plan established by the Board, the Board
contributed 10% of their gross pay through March of 2000, 15% through June 30, 2003, 20% through
May 31, 2009, 6% through December 2010 and 8% through June 30, 2012. The covered payroll for the Plan
for the year ended June 30, 2012 was $933,519. The Board's total payroll for the same period was $1,102,874.
Total contributions for the year ended June 30, 2012 were $74,681.
Beginning July 1, 2012, the Board established a 401(k) retirement plan for all eligible employees.
Eligible employees can make contributions up to the maximum amount allowed each year. The Board makes
contributions for eligible employees based on their gross pay. The amount of the Board's contribution is based
on the eligible employee's job description and length of service and, for the year ended June 30, 2013, the
Board contributed between 8% and 11.5% of eligible employees' gross pay. Total Board contributions for the
year ended June 30, 3013 were $93,504.
5. Lease Commitment
The Board leases office space under leases which expire through March 31, 2020. Rent expense for
these leases was $113,243 and $113,106 for the years ended June 30, 2013 and 2012, respectively.
Future minimum payments under the lease in effect at June 30, 2013 are as follows:
Year Ending Commitment
2014 $ 114,783
2015 117,755
2016 110,086
2017 102,171
2018 294,077
$ 738,872
The Board subleases a portion of its leased premises to a licensing exam administrator. The term of
the sublease is from January 1, 2013 to December 31, 2015. Rent income under this sublease for the years
ended June 30, 2013 and 2012 was $19,328 and $19,043, respectively. Future minimum payments to be
received under this lease are $4,903.
6. Risk Management
The Board is exposed to various risks of loss related to torts; theft of, damage to, and destruction of
assets; errors and omissions; injuries to employees; and natural disasters. These exposures to loss are handled
through a combination of methods, including participation in various state-administered risk programs,
purchase of commercial insurance, and self-retention of certain risks.
12.
NORTH CAROLINA STATE BOARD OF COSMETIC ART EXAMINERS
Notes to Financial Statements
June 30, 2013 and 2012
7. Prior Period Adjustment
The financial statements for June 30, 2012 have been restated to reflect a correction of unearned
revenue. Unearned revenue at June 30, 2012 was increased by $179,011, from $903,326 to $1,082,337. The
change in unearned revenue resulted in an increase to liabilities of $179,011, a decrease to revenue of
$179,011 and a decrease to change in net position of $179,011.
8. Reclassifications
Certain amounts for 2012 have been reclassified to conform with the 2013 financial statement
presentation. Such reclassifications have no effect on changes in net position or cash flows as previously
reported.

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NORTH CAROLINA STATE BOARD
OF COSMETIC ART EXAMINERS
Financial Statements
June 30, 2013 and 2012
oOo
TABLE OF CONTENTS
Pages
Management's Discussion and Analysis 1-3
Independent Auditor's Report 4-5
Statements of Net Position 6
Statements of Revenues, Expenses and Changes in Net Position 7
Statements of Cash Flows 8
Notes to Financial Statements 9-12
NORTH CAROLINA STATE BOARD OF COSMETIC ART EXAMINERS
Management's Discussion and Analysis
June 30, 2013
This section of the North Carolina State Board of Cosmetic Art Examiners' (the Board) financial report represents our
discussion and analysis of the financial performance of the Board for the year ended June 30, 2013. This information
should be read in conjunction with the audited financial statements included in this report.
Overview of the Financial Statements
The audited financial statements of the Board consist of the following components:
Management's Discussion and Analysis
Financial Statements
Notes to Financial Statements
The financial statements include comparative statements of net position, statements of revenues, expenses and changes
in net position, and statements of cash flows.
Financial Highlights and Analysis
Net position is an indicator of the financial health of the Board. As of June 30, 2013, assets exceeded liabilities by
$283,631. At June 30, 2012, assets exceeded liabilities by $345,225.
Table 1
Condensed Statement of Net Position
June 30, June 30,
2013 2012
Current Assets $ 1,169,717 $ 1,489,972
Capital Assets 137,382 72,448
Total Assets $ 1,307,099 $ 1,562,420
Current Liabilities $ 432,319 $ 861,703
Long-Term Liabilities 591,149 355,492
Total Liabilities $ 1,023,468 $ 1,217,195
Invested in Capital Assets $ 137,382 $ 72,448
Unrestricted Net Position 146,249 272,777
Total Net Position $ 283,631 $ 345,225
2.
NORTH CAROLINA STATE BOARD OF COSMETIC ART EXAMINERS
Management's Discussion and Analysis
June 30, 2013
The following table summarizes the revenues and expenses for the Board for the fiscal years ending June 30, 2013 and
2012:
Table 2
Condensed Statement of Revenues, Expenses and Changes in Net Position
Year Ending Year Ending
June 30, June 30,
2013 2012
Operating Revenues $ 2,161,376 $ 2,030,258
Nonoperating Revenues 26,403 33,243
Total Revenues 2,187,779 2,063,501
Operating Expenses 2,249,373 2,265,738
Change in Net Position (61,594) (202,237)
Beginning Net Position 345,225 547,462
Ending Net Position $ 283,631 $ 345,225
Net position decreased by $61,594 for the year ended June 30, 2013. Operating revenues increased by $131,118 and
expenses decreased by $16,365 during the year. The primary factor in the increased revenue was an increase in
business fees and licenses. The major decrease in expenses was a decrease in contracted services expense. There were
no significant variances between the Board's budget and the actual amounts for the year ended June 30, 2013.
Net Capital Assets
Net capital assets increased by $64,934 during the year ended June 30, 2013. The majority of the increase was due to
the purchase of a new online system that consolidates the Board's legacy software and databases into a modern web-based
application. The following is a summary of capital assets, net of depreciation:
Table 3
Capital Assets (net of depreciation)
June 30, June 30,
2013 2012
Electronic and Data Processing Equipment $ 136,908 $ 71,369
Office Furniture and Equipment 474 1,079
$ 137,382 $ 72,448
3.
NORTH CAROLINA STATE BOARD OF COSMETIC ART EXAMINERS
Management's Discussion and Analysis
June 30, 2013
Factors Impacting Future Periods
The majority of the Board's revenue results from the renewal and collection of license fees from cosmetologists. The
Board has converted from the three year cosmetologist renewal to a rolling renewal in which approximately 1/3 of
cosmetologists renew each year. It is expected that the conversion will result in more consistent revenue collection and
increased operating efficiencies. The Board served 86,484 licensees at June 30, 2013 and 71,856 at June 30, 2012. The
Board continues to encourage the renewal of payments by credit card using its website. The Board estimates that 72%
of eligible renewals were completed online. The Board also collects license fees from manicurists, estheticians,
cosmetologist apprentices, and schools.
Requests for Information
This report is intended to provide a summary of the financial position of North Carolina State Board of Cosmetic Art
Examiners. Questions or requests for additional information should be addressed to:
Lynda Elliott, Executive Director
North Carolina State Board of Cosmetic Art Examiners
1207 Front Street, Suite 110
Raleigh, NC 27609
To the Board of Directors
North Carolina State Board of Cosmetic Art Examiners
Raleigh, North Carolina
INDEPENDENT AUDITOR’S REPORT
We have audited the accompanying financial statements of North Carolina State Board of Cosmetic Art
Examiners, an agency of the State of North Carolina, as of and for the years ended June 30, 2013 and 2012, and the
related notes to the financial statements, which collectively comprise the Board's financial statements as listed in the
table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes the design,
implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our
audit in accordance with auditing standards generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks
of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments,
the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinions.
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of North Carolina State Board of Cosmetic Art Examiners, an agency of the State of North Carolina, as of
June 30, 2013 and 2012, and the changes in financial position and cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States of America.
5.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s
discussion and analysis on pages 1 through 3 be presented to supplement the financial statements. Such information,
although not a part of the financial statements, is required by the Governmental Accounting Standards Board, who
considers it to be an essential part of financial reporting for placing the financial statements in an appropriate
operational, economic, or historical context. We have applied certain limited procedures to the required supplementary
information in accordance with auditing standards generally accepted in the United States of America, which consisted
of inquiries of management about the methods of preparing the information and comparing the information for
consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we
obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on
the information because the limited procedures do not provide us with sufficient evidence to express an opinion or
provide any assurance.
Raleigh, North Carolina
October 28, 2013
6.
CURRENT ASSETS:
Cash $ 1,141,988 $ 1,461,494
Accounts Receivable 4,919 4,919
Prepaid Expenses 22,810 23,559
Total Current Assets 1,169,717 1,489,972
CAPITAL ASSETS:
Furniture and Equipment 39,144 39,144
Computer Equipment 328,744 241,436
Total 367,888 280,580
Less Accumulated Depreciation 230,506 208,132
Net Capital Assets 137,382 72,448
Total Assets $ 1,307,099 $ 1,562,420
CURRENT LIABILITIES:
Accounts Payable $ 57,697 $ 69,217
Accrued Salary and Vacation 73,869 65,641
Unearned Revenue 300,753 726,845
Total Current Liabilities 432,319 861,703
LONG-TERM LIABILITIES:
Unearned Revenue 591,149 355,492
Total Liabilities $ 1,023,468 $ 1,217,195
NET POSITION:
Invested in Capital Assets $ 137,382 $ 72,448
Unrestricted, Restated 146,249 272,777
Total Net Position $ 283,631 $ 345,225
The accompanying notes are an integral part of the financial statements.
2012
NORTH CAROLINA STATE BOARD OF COSMETIC ART EXAMINERS
Statements of Net Assets
June 30, 2013 and 2012
2013
7.
OPERATING REVENUES:
Business Fees, Licenses and Exams $ 1,026,462 $ 897,789
Certification Fees and Licenses 187,325 170,777
Fines, Penalties and Assessments 445,828 417,966
Continuing Education 62,455
Processing Fee 498,187 477,571
Miscellaneous 3,574 3,700
Total Operating Revenues 2,161,376 2,030,258
OPERATING EXPENSES:
Salaries 1,118,984 1,102,874
Health Insurance Contributions 209,631 192,931
Civil Penalty and Forfeiture Fund Payment 189,142 195,615
Transportation 130,756 99,155
Office Rent 113,243 113,106
Retirement Contributions 93,504 108,431
Social Security Contributions 83,379 86,608
Telephone and Communications 46,877 49,585
Legal and Other Professional Services 42,191 45,842
Postage 41,548 45,139
Electronic Payment Processing Fee 25,051 16,640
Printing 24,758 21,041
Depreciation 22,373 25,909
Miscellaneous 22,105 11,171
Unemployment Compensation 20,414 8,272
Supplies and Materials 17,106 8,876
Computer and Data Processing Expense 13,018 19,270
Contracted Services 12,390 88,256
Workmen's Compensation Insurance 12,040 7,972
Life and Disability Insurance 6,186 6,357
Compensation--Board Members 3,300 4,555
Meals and Lodging 826 3,262
Maintenance Agreements and Repairs 551
Workmen's Compensation--Medical Payments 4,871
Total Operating Expenses 2,249,373 2,265,738
OPERATING LOSS (87,997) (235,480)
NONOPERATING REVENUES:
Rental Income 19,328 19,043
Interest Income 7,075 14,200
Total Nonoperating Revenues 26,403 33,243
CHANGE IN NET POSITION (61,594) (202,237)
NET POSITION--Beginning of Year 345,225 547,462
NET POSITION--End of Year, Restated $ 283,631 $ 345,225
The accompanying notes are an integral part of the financial statements.
2013 2012
NORTH CAROLINA STATE BOARD OF COSMETIC ART EXAMINERS
Statements of Revenues, Expenses and Changes in Net Position
For the Years Ended June 30, 2013 and 2012
8.
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash Received from Licensees and Applicants $ 1,970,942 $ 1,823,683
Cash Payments to Employees for Services (1,110,756) (1,128,824)
Cash Paid for Operating Expenses (1,118,787) (1,144,145)
Net Cash Used by Operating Activities (258,601) (449,286)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Capital Assets (87,308) (46,284)
Receipt of Interest Income 19,328 14,200
Receipt of Rental Income 7,075 19,043
Net Cash Used by Investing Activities (60,905) (13,041)
NET DECREASE IN CASH (319,506) (462,327)
CASH--Beginning of Year 1,461,494 1,923,821
CASH--End of Year $ 1,141,988 $ 1,461,494
RECONCILIATION OF OPERATING INCOME TO
NET CASH USED BY OPERATING ACTIVITIES:
Operating Loss $ (87,997) $ (235,480)
Adjustments to Reconcile Operating Income to
Net Cash Used by Operating Activities:
Depreciation 22,373 25,909
Changes in Assets and Liabilities:
Prepaid Expense 749 (7,852)
Accounts Payable (11,520) 662
Accrued Salary and Vacation 8,228 (25,950)
Unearned Revenue (190,434) (206,575)
Net Cash Used by Operating Activities $ (258,601) $ (449,286)
The accompanying notes are an integral part of the financial statements.
2013 2012
NORTH CAROLINA STATE BOARD OF COSMETIC ART EXAMINERS
Statements of Cash Flows
For the Years Ended June 30, 2013 and 2012
9.
NORTH CAROLINA STATE BOARD OF COSMETIC ART EXAMINERS
Notes to Financial Statements
June 30, 2013 and 2012
1. Summary of Significant Accounting Policies
A. Organization:
The North Carolina State Board of Cosmetic Art Examiners (the Board) is established by Chapter 88
of the General Statutes of North Carolina to maintain minimum standards for services provided for regulating
the practice of cosmetology. The Board's operations are primarily funded through license and inspection fees.
B. Reporting Entity:
The Board is considered an agency of the state of North Carolina and along with other state licensing
boards is reported as an enterprise fund within the State's Comprehensive Annual Financial Report (CAFR).
C. Basis of Presentation:
The accompanying financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America. The Governmental Accounting Standards Board (GASB)
is the accepted standard setting body for establishing governmental accounting principles and reporting
standards. The Board applied all applicable Financial Accounting Standards Board (FASB) pronouncements
issued before November 30, 1989.
All activities of the Board are accounted for within a single proprietary (enterprise) fund. Proprietary
funds are used to account for operations that are financed and operated in a manner similar to private business
enterprises where the intent of the governing body is that the cost of providing goods or services to the
general public on a continuing basis be financed or recovered primarily through user charges or fees.
D. Basis of Accounting:
In accordance with Statement of Governmental Accounting Standards No. 34, the Board herewith
presents Statements of Net position, Statements of Revenues, Expenses, and Changes in Net position, and
Statements of Cash Flows. These statements reflect entity-wide operations of the Board. The Board has no
fiduciary funds or component units.
E. Accounting Estimates:
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates.
F. Accounts Receivable:
Accounts receivable consists of amounts due from employees. No reserve for doubtful accounts is
necessary.
G. Capital Assets:
Capital assets are recorded at original cost using a capitalization threshold of $500. Depreciation on
furniture and office equipment is computed using the straight-line method over the estimated useful lives of
the individual assets, ranging from three to seven years. Expenditures for repairs and maintenance are charged
to expense as incurred. The cost and related accumulated depreciation associated with capital assets are
removed from the accounts upon retirement or other disposition, and any resulting gain or loss is reflected as
nonoperating items.
10.
NORTH CAROLINA STATE BOARD OF COSMETIC ART EXAMINERS
Notes to Financial Statements
June 30, 2013 and 2012
1. Summary of Significant Accounting Policies (Continued)
H. Compensated Absences:
The vacation policy of the Board provides for accumulation of earned vacation with such leave being
fully vested when earned. Because such leave is payable to employees at termination, a liability for the
outstanding balances has been recorded. Accrued vacation totaled $73,869 and $64,845 at June 30, 2013 and
2012, respectively.
I. Net Position:
Net position is classified as invested in capital assets, net of related debt; restricted; and unrestricted.
Restricted net position represents constraints on resources that are either externally imposed by creditors,
grantors, contributors or laws or regulations of other governments or imposed by law through state statute.
The Board currently has no restricted net position.
J. Unearned Revenue:
License fees are assessed, collected and renewed for varying fiscal years for periods of one to three
years. License renewal fees, which cover periods subsequent to June 30, 2013 and 2012, are deferred and
recognized as revenue over the period to which they relate. The majority of dues collected result from the
renewal of cosmetologist licenses. Dues collected from the three year renewal of cosmetologist licenses are
used to fund the administration of licensing and regulating the state's cosmetologists.
K. Subsequent Events:
Subsequent events have been evaluated through October 28, 2013, which is the date the financial
statements were available to be issued.
2. Deposits
The Board's portion of the State Treasurer's Cash and Investment Pool was $1,141,988 at June 30,
2013 and $1,461,494 at June 30, 2012. It is the State Treasurer's policy and practice for deposits not covered
by federal depository insurance to be covered by collateral held by the State of North Carolina's agent in the
name of the State.
3. Capital Assets
Changes in capital assets for the year ended June 30, 2013 were as follows:
June 30, June 30,
2012 Additions Retirements 2013
Furniture $ 39,144 $ $ $ 39,144
Electronic and Data Processing 241,436 87,308 328,744
Total Assets $ 280,580 $ 87,308 $ $ 367,888
Changes in capital assets for the year ended June 30, 2012 were as follows:
June 30, June 30,
2011 Additions Retirements 2012
Furniture $ 40,370 $ $ 1,226 $ 39,144
Electronic and Data Processing 210,915 46,284 15,763 241,436
Total Assets $ 251,285 $ 46,284 $ 16,989 $ 280,580
11.
NORTH CAROLINA STATE BOARD OF COSMETIC ART EXAMINERS
Notes to Financial Statements
June 30, 2013 and 2012
4. Retirement Plans
Individual Simplified Employee Pension (SEP) Plan
Employees hired subsequent to June 30, 1983 are not eligible to participate in the Teachers' and State
Employee's Retirement System of North Carolina. Through June 30, 2012, the Board elected to provide those
employees with retirement benefits through individual simplified employee pension (SEP) accounts. Under a
SEP, the employer is permitted to make contributions directly to an individual retirement account set up by an
employee with a qualified financial institution. Under the plan established by the Board, the Board
contributed 10% of their gross pay through March of 2000, 15% through June 30, 2003, 20% through
May 31, 2009, 6% through December 2010 and 8% through June 30, 2012. The covered payroll for the Plan
for the year ended June 30, 2012 was $933,519. The Board's total payroll for the same period was $1,102,874.
Total contributions for the year ended June 30, 2012 were $74,681.
Beginning July 1, 2012, the Board established a 401(k) retirement plan for all eligible employees.
Eligible employees can make contributions up to the maximum amount allowed each year. The Board makes
contributions for eligible employees based on their gross pay. The amount of the Board's contribution is based
on the eligible employee's job description and length of service and, for the year ended June 30, 2013, the
Board contributed between 8% and 11.5% of eligible employees' gross pay. Total Board contributions for the
year ended June 30, 3013 were $93,504.
5. Lease Commitment
The Board leases office space under leases which expire through March 31, 2020. Rent expense for
these leases was $113,243 and $113,106 for the years ended June 30, 2013 and 2012, respectively.
Future minimum payments under the lease in effect at June 30, 2013 are as follows:
Year Ending Commitment
2014 $ 114,783
2015 117,755
2016 110,086
2017 102,171
2018 294,077
$ 738,872
The Board subleases a portion of its leased premises to a licensing exam administrator. The term of
the sublease is from January 1, 2013 to December 31, 2015. Rent income under this sublease for the years
ended June 30, 2013 and 2012 was $19,328 and $19,043, respectively. Future minimum payments to be
received under this lease are $4,903.
6. Risk Management
The Board is exposed to various risks of loss related to torts; theft of, damage to, and destruction of
assets; errors and omissions; injuries to employees; and natural disasters. These exposures to loss are handled
through a combination of methods, including participation in various state-administered risk programs,
purchase of commercial insurance, and self-retention of certain risks.
12.
NORTH CAROLINA STATE BOARD OF COSMETIC ART EXAMINERS
Notes to Financial Statements
June 30, 2013 and 2012
7. Prior Period Adjustment
The financial statements for June 30, 2012 have been restated to reflect a correction of unearned
revenue. Unearned revenue at June 30, 2012 was increased by $179,011, from $903,326 to $1,082,337. The
change in unearned revenue resulted in an increase to liabilities of $179,011, a decrease to revenue of
$179,011 and a decrease to change in net position of $179,011.
8. Reclassifications
Certain amounts for 2012 have been reclassified to conform with the 2013 financial statement
presentation. Such reclassifications have no effect on changes in net position or cash flows as previously
reported.